Bitcoin Loans: How to borrow against your BTC

Just like a bank might use your house or car as collateral, crypto lenders like Ledn use your Bitcoin the same way – they just simplify the process.

You hand over your coins as collateral, get cash out, AND you keep your upside if the price of $BTC goes up.

The lender holds onto your Bitcoin while you make repayments, and once you’re done you get your stack back.

The only catch is if the market price of $BTC drops too far – your loan-to-value shoots up, and the platform can liquidate some of your coins to cover the risk.

Why Borrow Against Bitcoin?

Borrowing against your Bitcoin is basically a way to get cash without giving up your position.

If you’re ever short on cash but long on crypto, it’s a great way to get money to cover bills, take advantage of an opportunity, or handle something short-term – all without selling your $BTC.

Once you pay the loan back, your $BTC comes right back to you.

In a lot of places, it can also be a cleaner move tax-wise – you’re not selling anything to get the money, so it’s often not a taxable move (check your local tax laws).

What are the different types of $BTC-backed borrowing?

Not all bitcoin-backed borrowing platforms play by the same rules.

Some take actual $BTC, some only deal with wrapped versions. Some lend you cash, others stick to crypto. And they all run things a little differently.

Here are the two main types of platforms you’ll find:

1. Borrowing against $BTC directly with CeFi

You send your real Bitcoin to a centralized lender, they hold onto it, and they’ll lend you cash or stablecoins against it – pretty straightforward.

2. Borrowing against “wrapped” $BTC with DeFi

It’s hard to automate stuff with actual Bitcoins – so people use tokens (usually on the Ethereum network) that are redeemable for $BTC instead.

You lock up wrapped Bitcoin in a smart contract, and the protocol will lend you stablecoins and other crypto against it – no sign-ups or humans, just computer code.

CeFi or DeFi? How To Choose A Loan Platform

Alright! Now you understand the upsides and risks of Bitcoin-backed loans.

The next step is figuring out where to actually get one.

As we mentioned earlier, you’ve basically got two lanes: CeFi, which feels more like using a normal financial app, and DeFi, which gives you full onchain control.

Here’s a simple side-by-side table to help you choose what fits your style:

CeFi vs. DeFi: Side-By-Side Comparison

Platforms like Coinbase Borrow and Rocko blend both worlds – the user-friendliness of CeFi, with the transparency and efficiency of DeFi.

Our Milk Road Pick: Ledn

Our personal Milk Road recommendation is Ledn.

It’s got all of the ease-of-use you would want, deals with actual $BTC, and can give you USD or fiat currency straight to your bank account.

Throw in its perfect track record and transparency, and you’ve got the perfect platform.

Best for: Bitcoin holders who want to borrow, earn, or double their stack without selling.

Why Borrow with Ledn?

• $10.5B+ loaned, zero client losses
• Verified Proof-of-Reserves every 6 months
• B2X tool to double $BTC exposure

What’s LTV, and Is A Higher LTV Better?

One of the biggest risks with Bitcoin-backed loans is simply Bitcoin’s volatility.

To understand why, let me refresh your memory on an important little figure lenders call “LTV”:

Loan-to-value ratio (LTV) is simply a number representing how much you’ve borrowed, compared to how much your collateral is worth.

The higher the LTV, the riskier the loan.

When $BTC drops, the value of your collateral falls with it, and your LTV shoots up.

If it gets too high – often somewhere in the 75%–90% range – the lender will liquidate your collateral to repay the loan.

Why? It covers their butt if you can't repay them, and also keeps other borrowers safe.

And here’s the annoying part: liquidations can also trigger a taxable event, even though taking out the loan itself isn’t taxable.

If your cost basis was lower than the price your $BTC is sold at, you’re looking at potential capital gains tax.

Some centralized platforms will give you a margin call first – basically the lender telling you to fix your LTV by adding more $BTC or paying part of the loan back.

On DeFi platforms, there’s often no warning. The smart contract will start to liquidate you automatically, the moment your LTV crosses the threshold.

Let’s break down margin calls a little more…

Margin Calls: How To Avoid Them

A margin call is basically the lender tapping you on the shoulder and saying:

“Hey, your loan is getting risky – add more collateral or pay some of it down.”

Let’s say you borrow $10,000 and put up $20,000 worth of $BTC. Your starting LTV is 50%.

If Bitcoin drops and your collateral falls to $15,000, your LTV jumps to around 67% – high enough that many lenders would send a margin call.

If the price keeps falling and you don’t fix it, the lender can sell your $BTC to cover the loan.

Here’s how one major lender structures it:

• Target LTV (50%) – Your starting point. This is the “healthy zone” the lender wants you to stay near.
• Margin Call LTV (70%) – If your LTV hits roughly 65–70%, expect a warning to top up collateral or pay down your loan.
• Liquidation LTV (80%) – If your LTV hits this level and you haven’t acted, the lender can liquidate your $BTC to settle the balance.

That’s the basic flow. Healthy → warning → liquidation.

Are There Other Risks When Borrowing Against Bitcoin?

Bitcoin loans come with a few risks worth keeping on your radar – some are the usual lending risks, and some are very crypto-specific.

• Custodial risk: If you borrow through a CeFi platform, you have to hand over your $BTC to them. If that platform gets hacked, freezes withdrawals, or goes bankrupt, your collateral could be at risk. Stick to platforms with a solid track record.
• Rehypothecation: The nerdy word for putting up your $BTC as collateral is “hypothecation”. If lenders re-use that collateral for their own purposes – that’s called “rehypothecation”. That’s extra risk to you, so make sure you know what your lender does with client assets.
• Smart contract risk: When it comes to DeFi loans, everything runs on code. If the smart contract has a bug or gets exploited, your collateral could be drained – with no human in the loop to stop it. Always check if the protocol has been audited, and how battle-tested it is.

Best Bitcoin-Backed Borrowing Platforms

So now you’re up to speed with how Bitcoin-backed borrowing works. But what are the best platforms available?

Here are the our top picks, along with the key $BTC-specific figures you’ll want to know:

1. Ledn

Ledn is a pure Bitcoin lender – they don’t deal with anything except $BTC.

This razor focus has made their borrowing experience super streamlined, and you can tell they’ve listened to what their customers want.

They also make sure you have all the tools you need to minimize your liquidation risk.

You borrow against real Bitcoin and get either cash to your bank or stablecoins to your wallet. If you’re feeling bullish, their B2X tool can even let you instantly boost your $BTC exposure.

They’ve also stayed rock-solid through every major crypto meltdown since 2018, with zero client losses and third-party Proof-of-Reserves audits to back it up.

Why Borrow With Ledn?

• Bitcoin-only specialists
• Unique B2X tool for doubling $BTC exposure
• $11.4 billion in loans and zero client collateral losses since 2018

2. Nexo

Nexo is one of the biggest CeFi lenders still standing, supporting 100+ assets as collateral.

When it comes to bitcoin-backed borrowing, it’s a solid option for borrowing against both $BTC and $WBTC (wrapped bitcoin on Ethereum).

You deposit your Bitcoin, get instant approval, and can pull out fiat, stablecoins, or more crypto – usually within a day.

It’s beginner-friendly, fast, and flexible, with a bunch of repayment options and ways to lower your interest rate if you want to.

Why Borrow With Nexo?

• Supports both $BTC and $WBTC as collateral
• Fast approvals and funding within ~24 hours
• Flexible payouts: fiat, stablecoins, or crypto

3. SALT

SALT is one of the OG Bitcoin lenders in the industry – focused on $BTC-backed loans since 2016.

Just like Ledn, they’ve never lost a single satoshi of client collateral.

You deposit your $BTC, borrow up to 70% of its value, and get cash to your bank or stablecoins in roughly 24–48 hours with no credit checks.

They’re heavily regulated in the US, big on security, and offer tools like Stabilization and “SALT Shield”, so market crashes don’t turn into forced liquidations.

Rates start at 7.95%, and the whole experience is built for people who want liquidity without touching their long-term Bitcoin stack.

Why Borrow With SALT?

• Bitcoin-focused lender with a flawless track record since 2016
• SALT Shield: optional no-liquidation protection for your entire loan term
• Highly regulated, US-based, and designed for fast $BTC-backed liquidity

4. Coinbase Borrow

Coinbase Borrow lets you borrow against your Bitcoin, but instead of getting cash upfront, you receive $USDC.

You can instantly sell that $USDC for USD on the exchange if you want to withdraw to your bank.

Behind the scenes, your $BTC gets converted into $cbBTC, Coinbase’s wrapped Bitcoin token, and that $cbBTC is used as collateral on Morpho, a DeFi lending layer that powers the whole system.

It’s nice and simple on the surface, but the magic happens in the background so you don’t have to think about any of it.

Why Borrow With Coinbase Borrow?

• Super beginner-friendly way to borrow against Bitcoin
• Instant $USDC you can convert to USD anytime
• Runs on Morpho under the hood for efficient on-chain collateral handling

5. Aave

Aave supports a huge range of crypto-backed borrowing options, but for Bitcoin specifically, it only works with wrapped or tokenized versions – not native $BTC.

The good news is it supports a ton of them: $WBTC, $cbBTC, $LBTC, $tBTC, $eBTC, $FBTC, and more.

The only catch is that if you’re holding regular Bitcoin, you’ll need to wrap or swap it yourself before using Aave – and that can be a tricky extra step.

If you already have one of those tokens, though, you can jump right into the protocol and borrow stablecoins instantly.

Why Borrow With Aave?

• Massive selection of $BTC-backed tokens to use as collateral
• Instant access to stablecoins once your wrapped $BTC is deposited
• Fully on-chain, decentralized borrowing with no sign-ups needed

6. Rocko

Rocko is a super clean, beginner-friendly way to borrow $USDC against your Bitcoin, without touching complicated DeFi tools yourself.

It supports most major Bitcoin assets – $BTC, $WBTC, tBTC, and cbBTC – and automatically finds the best $BTC-backed borrowing rate across Aave, Compound, and Morpho.

You still stay fully in control of your funds (it’s non-custodial), and the dashboard gives you alerts, refinancing options, and simple loan management in one place.

The catch is you can only borrow $USDC for now, but you can instantly swap that to USD on most exchanges.

Why Borrow With Rocko?

• Aggregates the best $BTC-backed rates from Aave, Compound, and Morpho
• Supports $BTC, $WBTC, $tBTC, and $cbBTC as collateral
• Non-custodial setup with easy loan alerts and one-click refinancing

Fees for Borrowing Against Your $BTC

Fees for Bitcoin-backed loans are usually pretty simple, but they can stack up if you’re not paying attention. Here are the ones that matter:

• Origination / Admin Fee: A one-time fee charged when you open the loan. Because Bitcoin loans are often short-term, this fee can make the overall cost higher than you’d expect.
• Gas Fees: On DeFi platforms, every action – depositing, borrowing, repaying – costs gas. It’s not a lender fee, just the cost of using the blockchain.
• Withdrawal Fee: Some CeFi lenders charge a small fee to withdraw your $BTC after you repay the loan.
• Liquidation Fee: If your loan gets liquidated, some platforms take a percentage of your collateral (sometimes up to ~7%). Always check this ahead of time.
• Conversion & Transfer Costs: If your loan pays out in $USDC but you need cash in your bank, converting and moving it will add extra costs. Same goes for swapping or bridging assets on DeFi.

Crypto Loans Without Collateral

You can get a Bitcoin loan without putting up collateral, but these options are high-risk and not something we recommend for most people.

The most crypto-native version is a flash loan – a loan that’s borrowed and repaid in the same transaction, usually for quick trading or arbitrage.

It’s powerful, but it doesn’t work for the things you’d generally want a loan for.

For longer-term, no-collateral options, there are a couple of routes:

• Peer-to-peer lending: Some platforms let individuals lend directly to each other without deposits.
• Unsecured loans: A few services offer loans based on credit checks instead of crypto collateral — basically a traditional loan with a crypto twist.

Just keep in mind: no-collateral loans come with much higher interest rates, and availability varies a lot by region.

Secured, $BTC-backed loans are usually safer, cheaper, and more predictable.

Bitcoin-Backed Borrowing Conclusion

Bitcoin loans come in all shapes and sizes, and they’re a handy way to unlock cash without giving up your $BTC as it (hopefully) grows.

The perks are real – but so are the risks – so it pays to watch your borrowing costs and keep a close eye on your LTV.

Handle it well, and a Bitcoin-backed loan can be a clever piece of your financial game plan.

If you want to take out your first Bitcoin-backed loan, try Ledn – easy to use, works with real $BTC, sends cash straight to your bank, and has a spotless track record.

Frequently Asked Questions